eTrends - New Laws Increase Need for Effective Reporting

With the recent passage of the Dodd-Frank Act and changes to the Federal Sentencing Guidelines for Organizations (“FSGOs”) scheduled to be effective November 1, 2010, employers are reminded of the importance of revisiting their programs and policies designed to encourage internal reporting of wrongdoing. As described in a Smith Anderson Client Alert, the recently enacted Dodd-Frank Act provides a financial “bounty” encouraging individuals to report securities violations to the SEC, and changes to the FSGO increase the need to adopt a compliance program that satisfies the requirements of the modified federal sentencing guidelines.

These regulatory changes are a reminder to all employers of the importance of establishing an environment in which employees feel it is their responsibility to let management know of misconduct within the organization and feel safe in their ability to report problems without fear of retribution. By proactively implementing a reporting program tailored to be effective and legally compliant for its particular work environment, an employer will not only avoid legal claims, but may also prevent misconduct, promote conduct consistent with its business values, reduce losses, avoid costly and burdensome problems, and prevent potentially embarrassing disclosures to customers, the media and others. By revisiting existing practices and policies to insure that an effective and compliant program is in effect, employers can further their business mission and avoid unnecessary legal tangles, organizational complications and the accompanying costs.

Smith Anderson publishes eTrends periodically as a service to clients and friends. The purpose of this eTrends is to provide general information about a significant legal development in the field of employment law. Readers should be aware that the facts may vary from one situation to another, so the conclusions stated herein may not be applicable to the reader’s particular circumstances.